A searchable audio archive from the 2013-2016 legislative sessions of the North Carolina General Assembly.

searching for

Reliance on Information Posted The information presented on or through the website is made available solely for general information purposes. We do not warrant the accuracy, completeness or usefulness of this information. Any reliance you place on such information is strictly at your own risk. We disclaim all liability and responsibility arising from any reliance placed on such materials by you or any other visitor to the Website, or by anyone who may be informed of any of its contents. Please see our Terms of Use for more information.

Senate | July 2, 2014 | Committee Room | Budget Conference

[SOUND] Good morning, everyone. Welcome to the Senate conference
meeting. Appreciate all of you being here, and if you’re a conferee and
have not taken your seat and you’re in the room, please do so because we
are having a little overcrowding issue here and we’ll try and make it as
comfortable for everyone as we possibly can. I do again want to thank
you for being here today. This is a very promising first step at
reaching a compromise between the Senate and the House. The purpose of
today’s meeting is for the Senate to present an offer to the House
concerning reversions, lottery, and Medicaid. And we’ll also give the
House an opportunity to respond after Senator Brown has given his
presentation. Before we do that Senator Brown, let me introduce our
sergeant of arms, and I think they’ll be in full strength today. We have
Canton Lewis, in the right corner. Ed Cassler, Ed, where you at here?
There in the back? We’ve got Steve McKay, Steve. And we’ve got Ernie
Cheryl. Ernie, right here. Thank you gentlemen, we appreciate all you
do. At this point in time, I will ask Senator Harry Brown to come forth
and present the Senate offer. [SPEAKER CHANGES] Thank you, Mr. Chair.
First of all, before I begin our offer, I guess I need to thank our
staff for working the hard hours it takes to put some of these numbers
together. The numbers we’re talking about today in particular Medicaid,
I don’t think I’ve got to tell anyone how complicated Medicaid is,
especially in this particular scenario because of the new computer
systems that we’ve had in place at HHS and trying to get numbers to base
I guess information on, the best information possible to come up with
real numbers. Also today we’re going to talk about Medicaid numbers,
lottery numbers and some reversions. Everything else in the two budgets
are still on the table for compromise and negotiation. I think that’s
important to say that, because there’s quite a few differences in the
two budgets. And I think the process that we have done over many years
has worked. We’ll have debates on those differences and we’ll work
through them like we always have. But we feel like on the Senate it’s
important that we get the starting number right, and that’s what we’re
talking about today are these three particular numbers. Having said
that, I guess I’ll start with reversions first. According to our staff,
the number that the Senate is using on reversions which is line 4 is 383
million dollars, roughly. The last offer from the House uses about 417
million. And I hope the House will respond a little bit, to try to help
us understand some of the reversion piece. It’s my understanding that of
the 34 million dollars difference between the two numbers, that about 26
million dollars of that was dollars that were allocated for mental
health issues. And according to staff, those dollars have been spent, so
they’re no longer available for reversion. That’s what we’re hearing and
why we’re getting to our number. Also through conversations, it’s our
understanding there’s still about 16, 17 million dollars of liabilities
on mental health still out there. So we feel like it was prudent to take
a number that staff felt comfortable with and that number was the 383
million dollar mark and I’m sure we can talk about how you came up with
your number because I think it is important we kind of talk through that
and figure that out. But that was how we came up with our number. The
next big piece is on lottery receipts, which is on line I think, still
line 33. I propose that we use the 116 million dollar number, which are
the new numbers that Barry Boardman came forward with a few days ago.
That is keeping lottery advertising at still 1%. It’s figuring in all
the new dollars that it can generate, and allocating those out. The
House offer is at 165 million and again, it’s my understanding and I
hope I can get some clarification so we can make sure that we’re right,
but on the 165 million I think the House position is to go to 2%

Based on new restrictions that the House has talked about previously,
that would generate about 29 million dollars, so there’s another 20
million dollars that’s different. Part of that 20 million dollars, it’s
our understanding, is that 19 million of that is to drop the forward
funding on the UNC scholarship money, which creates about 19 million.
Another 10 million or so is technology in schools, and then it turns
around and puts back about another 10 million for books I think in
schools, or supplies, and I think that’s how those numbers are worked
through the House. So those are differences. I think those can be
debated. Some of those pieces can be debated moving forward, but I think
we felt like that sticking with the 1 % and with the new revenue dollars
that Barry came forward with, which is 116 million dollars, is the
number we feel comfortable with using. The next piece is the Medicaid
piece, and again, I know OSBM and I know our staff have been working
together to try and get information to come up with the bet numbers
possible. I think we need to talk about a little history on Medicaid on
why we took our position that we’ve taken. In 09-10 – I’ll just touch on
some numbers – we had to… emergency funding basically for Medicaid, we
had to put in about 335 million. In 10-11 it was 601 million. In 11-12
it was 507 million, and in 12-13 it was 487 million, which totals almost
2 billion dollars in Medicaid that we’ve had to shore up each and every
year. To us that’s a pretty good trend, and I think it put us in a
position that we felt comfortable in taking the worst-case scenario
moving forward on Medicaid numbers. Our staff has got new information in
the past few days and have come up with numbers that they feel are
worst-case, best-case scenario for Medicaid. On the shortfall for the
13- 14 year, those numbers are 150 million dollars worst-case, 123
million dollar best-case. Our number’s the worst-case, which is 150
million dollars. The House’s position on their last proposal is about
118 million dollars. Then as far as the rebase or reserve, whatever we
want to call moving forward, the worst-case from our fiscal staff is
228. 3 million; best-case is 144 million. Again, we take the worst-case,
and that’s based on history of Medicaid, so our numbers are 228.3
million dollars. The House position in the last offer was 139.3 million
dollars, and again, I hope there’s some compromise or some movement
here, but again, our thoughts on Medicaid is look at the history. See
where we’ve been in the past three or four years as it relates to
Medicaid, and each and every year when we thought we had fully funded it
where we wouldn’t have problems, we’ve had to come back each and every
year and backfill Medicaid. We just feel like it’s a prudent thing to do
to continue to try to work through these Medicaid numbers and put
ourselves in a position for one time that we don’t have to do that, and
we feel like taking worst-case scenario is the only way we can assure
ourselves of possible doing that, with still no guarantee because again
if you look at history, we thought we’ve done that several years and it
just hasn’t happened. We’ve had to come back again year after year and
had to backfill. So those are our numbers and Representative Dollar, I’d
love for you to respond. I know you and I have been trying to work
through some of these and I know it’s complicated. I think we all will
agree with that, but that’s our offer and I’d love for you to respond,
and I look forward to trying to work through this stuff. It’s time that
we do move forward and again, everything is on the table for
negotiations. There’ a lot of issues that are different in the budget,
but again, we just feel that it’s important that these numbers are
settled on so we can move forward. [SPEAKER CHANGES] Thank you, Senator
Brown. Representative Dollar, you’re welcome. [SPEAKER CHANGES] Thank
you, Senator Brown, and

Mr. Chairman, and members of the Senate and the House and all these
curious people out here, watching on. What we would like to pass out at
this time, we've got some folks that can help us pass out, and I've got
a few here that some folks can start passing out. [SPEAKER CHANGES] Can
we get the sergeant of arms to help us here, please? [SPEAKER CHANGES]
I'm not sure if we have enough copies, but I want to make sure that all
the members receive copies. Mr. Chairman and Senator Brown, in
anticipation of today's meeting, we took some time yesterday and we
re-looked at the offer that you have in front of you on your sheet,
House Offer 2. And we decided it would be appropriate knowing for
example that these reversion numbers were changing, to make some
adjustments there and also to do what we believe is our part to break
the log jam and to move forward and to get our subcommittees negotiating
because we all want to get out of here and do so in as expeditious
manner as possible. The first thing I would not is of course and I think
we all agree on this, we do have a two year budget that's in place and
of course everyone is at work today in state government all across the
state. Summer school is in session, things are moving forward in the
state of North Carolina. Bills are being paid and that budget is being
executed on. These are adjustments to the second year of the biennial
budget and of course we have important things to do here and important
priorities that I think are actually shared greatly among the chambers.
What's being passed out is House Offer 3, I don't have your offer on
here, but I think you can work between the two pages. If you'll look at
line 3 on our House Offer, we have made an adjustment to the projected
reversions, commensurate with the latest information that we had this
morning, with respect to the 26 million dollars, the sort of sticky ball
as some people have called it, that has been kicked down the road for a
number of years. It is our understanding that that is paid for. That has
been paid. So to the extent that that has been paid, and settled with,
then that's certainly perfectly fine. And that is not in the reversion,
that's not reflected in our number. That is supposed to be, have already
been taken care of, as well as the MMIS amount and the Durham amount
which I think total were about 8.9 million dollars that had been
discussed previously. Our number in reversions is 393 million dollars. I
see yours is 883 million dollars. Your, I'm sorry 383. We're 393, and
you're 383. I would think that we could resolve that. I'm not sure, I
see that you've got the transfer from the high risk pool which we'll
have to check on that, see if that's already calculated in our numbers
elsewhere or if that is additional money that could be added to our
calculations as you have added it to your calculations. Okay, use the
same thing. All right, so we're already counted in, that's the same. So
there it looks like on your line 4 and our line 3, our staff

Be able to get together and resolve where that number needs to be and
because there's no need to have a different reversion number. But it
looks like we're pretty close to there. With respect to the following
areas down the page, let me just explain the offer, the House offer in
whole, and then I'll come back and address a couple of the issues that
have been raised. If you flip over to our offer keeps the same non tax
revenue that we have had in the past. Our education budget has not
changed. I'll come back and talk about the lottery at the end. We do
have this, on line 31 does include as you'll see noted there, the 2%
increase in advertising, reduced by the amount that Dr. Boardman had
calculated with respect to the honest lottery act, so that basically
made it around 29.8 or so, 29.9 million dollars, in additional available
revenue. If you look at the total for health and human services, what we
have done, we have been listening carefully to all of our previous
conversations and the clear message that we have received, Senator
Brown, from you and your excellent group is meet us in the middle. Let's
meet in the middle. Let's find a way to meet in the middle. So in
working with our numbers, and I'll talk a little more about Medicaid as
I said in a moment, so what we're putting on the table this morning is
to meet in the middle, between the latest we had yesterday of best case
worst case scenario. And that would provide 136.5 million dollars for
potential Medicaid back log, and that's really what you're talking about
there. And of course those numbers are times three, with federal match.
And that is up substantially from our original position in the budget
that we passed. And in line 40, in our what we would propose as a
Medicaid risk reserve, to have the greatest amount of transparency in
these funds for the second year, we again have gone between the midway
point between the best case and worst case scenario, and landed at
186.372 million dollars. I think it's important to understand that these
best case and worst case scenarios are just that. They are scenarios.
What we do not have, and everyone acknowledges this, is we do not have a
Medicaid forecast this year. Unfortunately that is the case. So there
are a lot of estimates being made on top of assumptions upon other
estimates. And it's the best that many folks can do and that is well
appreciated. And in recognition of that, we believe it is most
appropriate that if we are going to negotiate that we meet there in the
middle of those two ranges. And I'm going to come back and talk a little
bit more about Medicaid in a moment. What you also see there of course
are the additional reductions that we had put forward in our second
offer, with respect to moving up to the Senate's petition with respect
to the gap assessment. That percentage we also understand the House was
originally at 8 million dollars in salary and contracts. The Senate took
16. We understand there are 20 available, potentially available that
will not harm operations so we have put forward that additional 12
million dollars, 8 of which the Senate has captured in their number. In
looking at the other areas, justice and public safety, natural and
economic resources, turning on over to page 3 to general government.

those are the numbers that we had mentioned previously. I haven’t looked
in detail here. I think they correspond either, maybe exactly or pretty
nearly, to the numbers that were put forward in your offer sheet. In
some cases I think they’re the same, in some cases I think they may be a
couple of million dollars off. It does seem to me that, in those areas,
whether it’s IT, general government, justice and public safety, natural
and economic resources, transportation, those areas are areas where
we’re ready to have our sub chairs meet today, this afternoon, to begin
working through those areas. It seems to me we’re not far enough off in
those numbers to preclude them from working in their specific areas and
making the progress that they need to make. We’re fully agreeable and
have been, of course, that those items that were transfers could be
handled at the full-chair level anyway, as we would normally deal with
those. The balance, down on page four, in terms of reserve and debt, we
of course have the House version of the compensation plan for teachers
and state employees as we have had it. Capital improvements, we still
have our position on capital improvements. I would note that, in the
capital improvement area, our two sides are 2.2 million dollars off and
so I would assume that we would probably be able to, as full chairs,
negotiate how we want to handle those capital projects. On the back, the
contingencies that the House had put forward, again, the transfers we
can handle at the full-chair level including the crime lab that is not
offered at this time. The lottery, we do have, as I mentioned before,
29.589 million dollars. We’ve brought that forward because we knew that,
in a difficult year when revenues were extremely tight, it might not be
a bad idea to have the education lottery spend their money on education.
We had contacted them and we asked them what their ideas were, what
their proposals would be, in order to generate additional revenue. We
didn’t come into that conversation with any preconceived notions. They
brought forward their recommendations, things they told us they could
absolutely do. It went through the mix as, just like reversions are
changing, you’ve always got numbers that get adjusted and change, you
find out new information, better information, in the process and we are
perfectly comfortable with Dr. Boardman’s analysis there. We believe
that we ought to have a discussion that 29.5 million dollars would
certainly be helpful to our budget to have it. If we don’t have it then
we don’t have it. Item number four is what we would request, with
respect to the Medicaid risk reserve, is that that money be specifically
stipulated, that excess money in that risk reserve, at the end of the
budget year next year would be split equally between savings reserve,
repairs and renovations. Also the House affirms that we do not offer any
additional reductions in health and human services because we believe
there are little, if any, other areas--certainly no major areas--to make
those reductions and we would want to know where people are getting

Major amounts of money from there, and what those consequences might be.
We think that ought to be in the discussion if we’re going to, if we
were to travel down that route. The House offer assumes of course as I
mentioned before, the original House position on salaries and COLAs, and
we also assumed the House position on the education items in Senate Bill
744, 7th edition that was passed in the House. And just to review those
very briefly, those are of course your 5% average teacher raise, the
preservation of all of our teaching assistants in our classrooms, the
beginning of the career pathways to modernize our teacher payment system
which I believe is a shared goal of everyone, a number of other shared
things. The other real big program, obviously the closing the skills gap
money, I think there’s a small difference between the House and the
Senate, maybe as much technical as anything. For our community colleges,
obviously our universities at this time we do handle the money a little
bit differently. It’s as I recall Senator Brown, and I think I’m right
about this, but we’re fairly close on the university money. It’s really
more a matter of do we have a flex cut and we allow the EPA raises and
flexibility with the EPA raises, or do we not do the EPA raises and we
don’t have the flex cut and obviously that’s an issue that can be
[SPEAKER CHANGES] Representative Dollar? [SPEAKER CHANGES] Discussed.
Yes. [SPEAKER CHANGES] If you would please, wrap it up because we want
this ?? discussing these four items we brought up this morning and then
we’ll be taking questions from conferees on the, Senator Brown would
like to comment. [SPEAKER CHANGES] Mr. Chairman. [SPEAKER CHANGES] Can I
talk about Medicaid for a minute, or? [SPEAKER CHANGES] I was going to
just say Nelson, as I mentioned earlier before my comments, all this
stuff is on the table for negotiations, and we understand that. And
we’re willing to sit down and try and try to work through these issues
one at a time, however we need to do it, just like we’ve always tried to
do it. And I appreciate this offer. I want to say that publicly. I
appreciate you coming back with the offer that you’ve come back with.
And after some questions, I think I’ll have maybe another comment as
well. But go ahead if you want to talk about Medicaid. [SPEAKER CHANGES]
Yes. [SPEAKER CHANGES] Thank you, Mr. Chairman, for your indulgence.
[SPEAKER CHANGES] Yes sir. [SPEAKER CHANGES] As well as your prodding.
You know us in the House, we’ve always got to talk a lot. I apologize
for that. With respect to Medicaid, and I think that what Senator Brown
talked about in terms of the challenges that we’ve had and the figures
that he quoted are quite correct. We have had tremendous challenges in
Medicaid. We inherited some very significant problems there. What I
would posit is this, is that we do have something for that 2 billion
dollars that has been invested over that period of time. For example,
items that were owed back to the federal government, really hundreds of
millions that were owed back to the federal government. Probably the
biggest one was the debacle in community supports that happened in the
middle of the last decade, for which we were still paying. Those items
were off budget. They were not budgeted, they were not in
Governor-produced budget, that she presented to this body in 2011, and
really came to the fore during our joint legislative oversight
committees and I know that Senator Pate remembers this and House and
Senate remember this. And suddenly there were all these additional
shortfalls when we didn’t invested somewhere approaching around 750
million dollars, before and during that process in 2011. So those things
have been paid for. They have been put on the books and cleared through
and done. We’ve had other issues, for example the reason why we had
440-some million dollar rebates last year and the first year of this
biennium was in part program growth which is the normal program growth,
but a large share of that was due to past miscalculations on behalf of
the department with respect to the

Speaker : The federal participation so unfortunately we have to do
catching up that was not the fault of providers it was spiking claim
growth ?? how they are ?? we have the correct information ?? last year
believe it was 40 million dollar bill someone can correct me so
different so there was ?? August of last year that was unexpected but
it was odd matter that was ?? there 26 million dollar that senator brown
had talked about earlier another thing already been cleared up this ear
?? is called 13 drug repayment ?? if I'm not mistaken was the final ??
what you receive form the drug committees was kicked over into July ??
13 payment that is been cleared that is been address down with a ?? we
have new grown in charge that health and human services,
Speaker Changes: Representative dollar,
Speaker Changes: Yes sir,
Speaker Changes: If u could please write the ??,
Speaker Changes: I would simply say that i don't concern we don't
believe this is justified ?? in real people in need and with correct
access ?? out in the chair room thank you Mr.Chairmen i appreciate,
Speaker Changes: Thank you Mr.Representative if you could just stand up
there please and i would ask senator brown to come done as well ??
through the chair we will only take question from ?? whether is to
senate or house versions and we are all only been talking about phone
numbers brought towards us this morning,thank you ??,if not no questions
Mr.Brown,
Speaker Changes: I can compliment ,
Speaker Changes: Excuse me,
Speaker Changes: just a comment Mr.Chair most of my questions have been
answered in the discussion but i would charge our joint committees ??
work towards settling only medicate budget i thank well spread over the
entire budget that were working ?? human service or their hard work and
looking through the medicate balances ?? we hope for with new programs
ever have installer in health and human services i understand there a
was much involves timely reporting of the data and i congratulate the ??
and i still congratulate lot of ?? what the accurate numbers were what
they are ?? the house sub committee and the budget ?? ,
Speaker Changes: Senator Brown,
Speaker Changes: With that Mr.Chairman this is what would like to
propose i would take a ?? until by 11:15 and i think we like to come
back with comeback to your office if we could do that ?? ,
Speaker Changes: Representative dollar,
Speaker Changes: Representative dollar,

concerns from the Senate, from our lottery and with our offer and our
current proposal on the table, I just wanted to clarify and get you to
maybe make a statement that we are not relying on any of these lottery
dollars for anything with teacher salaries etc. Is that not a true
statement with our offer, that the lottery is not part of that?
[SPEAKER CHANGES]
Representative Dollar, you can respond please.
[SPEAKER CHANGES]
Thank you, Mr. Chairman. Those monies go into education, so they go
with, they go into, education.
[SPEAKER CHANGES]
Representative Burr.
[SPEAKER CHANGES]
Thank you, Mr. Chairman. I’d just ask, and maybe staff is working on
preparing this, but in order for us to be able to do a side-by-side
comparison of the Senate Offer 3 and the House Offer 3 can we get a
sheet, are you all working on a sheet, so we can see this comparison
right now and compare, for example, where the House has moved up I think
about $130 million in terms of the Medicaid? The rebase and the
shortfall dollar where we’ve made a significant movement to meet the
Senate in that direction. If we could get that it’d be great.
[SPEAKER CHANGES]
Representative Burr, I’m getting a lot of nods behind me that they are
working on it as we speak. They have it ready. Efficient staff. I like
that, thank you.
[SPEAKER CHANGES]
Mr. Chairman, we need to have all our committee hearings in this room.
It’s magic.
[SPEAKER CHANGES]
I agree. Let me have your attention please, let me have your attention.
Conferees and members, we are going to recess until 11:15. We will
readjourn at 11:15. Thank you.
One announcement before we get back into meeting: the House is just
going to gavel in and recess, your House members. Just so you’ll know.
The speaker wanted me to announce that. At this time the Senate has
worked together and Senator Brown will present what we’ve come back
with.
[SPEAKER CHANGES]
Thank you, Mr. Chairman.
[SPEAKER CHANGES]
Hold on a second, Senator Brown, we don’t have copies distributed.
[SPEAKER CHANGES]
Copies aren’t out yet?
[SPEAKER CHANGES]
They’re coming out now.
[SPEAKER CHANGES]
This is pretty simple. This kind of reminds me of selling a car a little
bit. This is pretty good. Good deal.
[SPEAKER CHANGES]
The only better deal that I know than him selling the car is you all
eating North Carolina peanuts, as a North Carolina peanut grower.
[SPEAKER CHANGES]
Mr. Chairman, I probably can go ahead. I think it’s pretty simple.
[SPEAKER CHANGES]
I think everybody has a ??, Senator Brown.
[SPEAKER CHANGES]
I think you could even look at your other copies that were passed out
and you can work off of it if you need to. Again, the three areas that
we’re going to touch on are the reversions, we were $10 million apart on
the reversions. Our proposal is just to split it down the middle so that
goes, we went from $383 to $388 million on reversion piece, on line 4.
On the lottery piece, we have some concerns about the uncertainty on the
lottery so we’d like to maintain our lottery position, which is what we
have now, which is 1% advertising on lottery, which generates the $116
million. Then, on the Medicaid piece, the shortfall for this year and
the rebase, or reserve, for next year, we will accept your numbers. The
other provisions, you have several contingencies at the bottom that you
had offered. Again, those contingencies should go into conference and be
debated just like everything else. We can’t agree to your contingencies.
We’ve got four down there but really what those four do, I guess, is
just say that cross sub-committee transfers are negotiated at the
full-chair level, that the lottery numbers assume no change in lottery
advertising--which pretty much stays at our number--the Medicaid rebase
funds will be recurring for the ‘14-’15 year and we go into a Medicaid
risk reserve only upon appropriation by the general assembly. I think
we’ve discussed that before and then it just basically says your other
contingencies, which were

to accept, basically, your pay plans and COLAs and HHS and all that.
We’ll just say that goes into conference and we’ll negotiate it out.
That’s the offer.
[SPEAKER CHANGES]
Thank you, Senator Brown. Representative Dollar.
[SPEAKER CHANGES]
Senator Brown, you haven’t sold the car yet but we do like some of the
features. We certainly are agreeable to accepting the reversion number.
Obviously, we’re agreeable on the shortfall and placing the money in a
risk reserve. It sounds like there may be some language issues, we can
discuss a little bit on how we handle that moving forward. We will
obviously need to get back to you in terms of, we’ve got your position
on the lottery so we’ll get back to you on where we are on that, and we
understand your position rather well. What I think we had discussed
previously was that, as early as this evening if it is convenient, or
first thing in the morning or at the earliest possible opportunity, in
particular with regard to transportation, IT, general government, the
JPS meeting. Since we are agreed on the starting point for all those
numbers that we would get those sub-committee chairs jointly working
together to start working through that process.
[SPEAKER CHANGES]
Senator Brown.
[SPEAKER CHANGES]
I will say this: we’d like to get working just as quick as we could. I
know everybody knows there’s a little storm on the coast that might
affect some people probably today and into tomorrow. We would like to
talk to our caucus and we’d like to reserve, maybe watch your e-mails
for maybe a meeting later today. I don’t want to commit to a time, let’s
try to be flexible later today, if you could, on a possible meeting.
[SPEAKER CHANGES]
Thank you all very much. This meeting is adjourned.